Stop passing the buck for India's telecom mess

Minister Kapil Sibal criticizes India's apex court for intervening in the telecoms industry, but the problem goes deeper in that the government views the sector as a "golden goose" instead of an enabler for change.

It's rare for someone to speak against the Supreme Court of India. But on Wednesday, the Communications and Information Technology Minister Kapil Sibal, who is also an acclaimed lawyer, spoke at length about the damage Supreme Court judgments have done to the telecom sector.

According to Sibal, since 2010, all court verdicts with regard to the telecom industry had not benefit it in any way. Speaking at the annual general meeting and national conference of industry body CII, Sibal said the intervention of the country's apex court had led to a massive deceleration in growth of the sector.

"Telecom was the golden goose which laid the golden egg. The Supreme Court ensured the golden goose will not lay golden egg[s] again for a little while," Sibal said.

The real problem, in my view, lies in the fact that the government has always viewed the telecom industry as a "golden goose". The telecom industry played a key role in the India growth story. It was able to record impressive growth rates not because it had great roads, ports, power plants and airports, but because of its telecom infrastructure that allowed the mushrooming of BPOs (business process outsourcing) across the country's cities and towns.

There was growth primarily in services and manufacturing but not in agriculture--a sector which continues to provide livelihood to two-thirds of the population. But despite fancy growth rates, there has been little overall development.

And the Supreme Court has little to do with it. Rather, it's the government machinery--what with its red tape, corruption, policy paralysis and the regulatory flip-flops--which led to the slow down in the telecom industry.

Once again, Sibal questioned the Comptroller and Auditor-General's (CAG) estimate of 1.76 trillion rupees (US$32 billion) loss to the exchequer resulting from spectrum allocation at rates fixed in 2001. In 2010, the CAG said then-telecom minister A. Raja's decision to give away spectrum at rates fixed in 2001 had caused the presumptive loss of 1.76 trillion rupees.

In a landmark judgment on February 2 last year, the Supreme Court annulled 122 mobile permits of nine telecom companies and ordered the government to auction airwaves vacated by the telcos at market-determined prices.

However, the decision to auction the 2G spectrum did not result in a windfall for the government. Instead, it saw some players exiting the market.

"Between 2010 and 2013, with all the experiments, with all the court verdicts and the CAG pegging the notional loss at 1,760 billion rupees, and after the re-sale of mobile permits, all we got into our kitty was 10 billion rupees," Sibal said.

The government had targeted a minimum of 280 billion rupees from the sale of 2G spectrum in the GSM band last year. The spectrum re-sale was seen as a tool to bridge the national fiscal deficit. Overall, the government had budgeted 400 billion rupees as revenue from spectrum sale in 2012-13.

"What is the result of this? The consumer tariffs have gone up. So the consumer has not benefited. The sector is under debt of 2,500 billion rupees (US$45.9 billion), so the sector has not benefited, and the government has got 10 billion rupees (US$$183.5 million), so the government has not benefited. I would like to know who has benefited," Sibal went on to ask.

The minister argued the intervention of the courts in policy making created 'dire trouble' as they did not have the experience to deal with matters of economic policy. "If [the] courts were to involve themselves in economic policy-making and determine the course of future of any particular sector in the economy, we are in dire trouble because courts do not have experience, nor do they have the wherewithal to learn from the experience," he said.

But why push things to a situation where the courts have to intervene? This was a unique case where the judiciary had to over-rule the political system.

In fact, there have been regulatory flip-flops on all fronts--from spectrum allocation to roaming, tariffs and the usage of spectrum. The government has rarely met its deadline for conducting auctions. There have been several factors put together that led to the existing mess in the Indian telecom sector.

Rather than playing the blame game, the government needs to view this as an opportunity to set things right. Telecoms is an enabler for change. It should not be viewed as a cash-cow. This attitude has not helped any government globally. In fact, it's this attitude that has pushed telecom operators into debt. If telecom operators are in debt, they cannot innovate and bring about change. And innovation is key to the survival of this industry.

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